E Trade Financial (ETFC) 8-K E*TRADE FINANCIAL Corporation Announces First Quarter 2009 Results

Exhibit 99.1

E*TRADE FINANCIAL Corporation Announces First Quarter 2009 Results

NEW YORK--(BUSINESS WIRE)--April 28, 2009--E*TRADE FINANCIAL Corporation (NASDAQ: ETFC)

First Quarter Results

• Total Net Revenue of $497 million
• Provision for Loan Losses of $454 million
• Net Loss of $233 million, or $0.41 per share
• Total Daily Average Revenue Trades (DARTs) of 194,000
• Record brokerage accounts of 2.7 million, with net new brokerage accounts of 63,000
• Record customer accounts of 4.5 million, with net new accounts of 56,000
• Total customer cash and deposits of $34.4 billion
• Total net new customer assets of $3.5 billion

Capital and Liquidity Metrics

• Bank Tier-1 and risk-based capital ratios of 5.63% and 11.85%, respectively
• Bank excess risk-based capital (excess to the regulatory well-capitalized threshold) of
  $451 million
• Corporate cash of $406 million; Bank cash of $3.9 billion; unused FHLB lines of $10.0 billion

E*TRADE FINANCIAL Corporation (NASDAQ: ETFC) today announced results for its first quarter ended March 31, 2009, reporting a net loss of $233 million, or $0.41 per share, compared with a net loss of $276 million, or $0.50 per share, in the prior quarter and a net loss of $91 million, or $0.20 per share, a year ago.

The Company reported total DARTs of 194,000 in the first quarter, an eight percent year-over-year increase, although a 10 percent decrease from the record levels of the prior quarter. The Company added 63,000 net new brokerage accounts during the period. At quarter end, E*TRADE reported a record 4.5 million customer accounts, which included a record 2.7 million brokerage accounts. Customer net new assets were $3.5 billion during the quarter. Total customer cash and deposits increased $2.1 billion, in part due to the continued growth of the Complete Savings Account despite a 1.56 percentage point drop in annual percentage yield during the quarter. Margin receivables declined from $2.8 to $2.4 billion.

“E*TRADE’s growth in net new brokerage accounts and customer assets was the result of a renewed focus on our core investor base, strong activity by existing customers across a full range of products, and a gain in market share versus traditional brokerage firms,” said Donald H. Layton, Chairman and CEO, E*TRADE FINANCIAL Corporation. “Transaction volumes were also strong in the first quarter on continued volatility and late-quarter rising markets.”

Commissions, fees and service charges, principal transactions, and other revenue for the first quarter were $202 million, which compared with $224 million in the fourth quarter. This reflects lower revenue from the decline in DARTs from last quarter’s record levels, fewer trading days in the quarter and lower revenue from principal transactions, partially offset by an increase in average commission per trade.

The Company reported net interest income of $279 million, an increase from $274 million in the fourth quarter, as a result of maintaining the level of interest earning assets and a slight increase in the interest income spread to 234 basis points. Total operating expense declined by $27 million to $294 million from the prior quarter and declined by $60 million year over year.

The Company continued to make progress during the first quarter in reducing balance sheet risk, shrinking its bank loan portfolio by approximately $1 billion from last quarter, of which approximately $700 million was related to prepayment or scheduled principal reductions.

In the home equity portfolio, which represents the Company’s greatest exposure to loan losses, special mention delinquencies (30-89 days) decreased 25 percent in the quarter, while “at risk” delinquencies (30-179 days) declined five percent. Total special mention delinquencies for the Company’s loan portfolio, which also includes one- to four-family and consumer and other loans, declined by 10 percent in the quarter.

“We continue to believe that E*TRADE’s loan portfolio is further advanced in the credit cycle than the broader industry,” said Mr. Layton. “Our home equity portfolio is showing signs of improving performance, with declines in special mention delinquencies in each month of the quarter; however, continued deterioration in the one- to four-family and consumer and other portfolios necessitated further reserve building this quarter.”

First quarter provision for loan losses decreased $59 million from the prior quarter to $454 million. Total allowance for loan losses increased $120 million to $1.2 billion, or five percent of gross loans receivable, as the Company increased its one- to four-family and consumer and other portfolio reserves. Total net charge-offs in the quarter were $334 million, an increase of $27 million from the prior quarter.

The Company reported Bank Tier-1 and risk-based capital ratios of 5.63 percent and 11.85 percent, respectively. The Bank had excess Tier-1 capital of $288 million and excess risk-based capital (i.e., above the level regulations define as well-capitalized) of $451 million as of March 31, 2009. The Company noted that subsequent to the end of the quarter, it injected an additional $150 million of capital into the Bank.

“Given the uncertainties of the current environment, we believe that it is necessary to further improve the Company’s capital position,” said Mr. Layton. “We have been increasing our efforts to reduce the size of the Bank’s balance sheet and the associated risk, to deleverage the Parent company’s capital structure, and also to generate additional capital to inject into the Bank.” The Company noted that such efforts would involve public market issuance and/or private investors and would create significant dilution to current shareholders; deleveraging of the Parent would also substantially reduce its interest expense.

The Company also noted that its primary banking regulator, the Office of Thrift Supervision, has advised the Company to address these capital requirements in the near term, including both raising new capital for E*TRADE Bank and reducing the leverage of the Parent holding company. One alternative that the Company continues to pursue is the U.S. Treasury’s TARP Capital Purchase Program which, if it is made available, would likely have additional conditions that would also produce significant dilution. The Company can not predict when or if its application will be acted upon.

Historical monthly metrics from January 2006 to March 2009 can be found on the E*TRADE FINANCIAL Investor Relations site at https://investor.etrade.com.

The Company will host a conference call to discuss the results beginning at 5:00 p.m. EDT today. This conference call will be available to domestic participants by dialing 800-683-1525 and 973-872-3197 for international participants. The conference ID number is 93649598. A live audio webcast and replay of this conference call will also be available at https://investor.etrade.com.

About E*TRADE FINANCIAL

The E*TRADE FINANCIAL family of companies provides financial services including trading, investing and related banking products and services to retail investors. Securities products and services are offered by E*TRADE Securities LLC (Member FINRA/SIPC). Bank products and services are offered by E*TRADE Bank, a Federal savings bank, Member FDIC, or its subsidiaries.

Important Notice

E*TRADE FINANCIAL, E*TRADE and the E*TRADE logo are trademarks or registered trademarks of E*TRADE FINANCIAL Corporation. The statements contained in this news release that are forward-looking are based on current expectations that are subject to a number of uncertainties and risks, and actual results may differ materially. The uncertainties and risks include, but are not limited to, changes in market activity, anticipated increases in the rate of new customer acquisition, the conversion of new visitors to the site to customers, the activity of customers and assets held at the institution, seasonality, macro trends of the economy in general and the residential real estate market, instability in the consumer credit markets and credit trends, rising mortgage interest rates, tighter mortgage lending guidelines across the industry, increased mortgage loan delinquency and default rates, portfolio growth, portfolio seasoning and resolution through collections, sales or charge-offs, the development and enhancement of products and services, competitive pressures (including price competition), system failures, economic and political conditions, including changes to the U.S. Treasury’s Troubled Asset Relief Program, changes in consumer behavior and the introduction of competing products having technological and/or other advantages. Further information about these risks and uncertainties can be found in the information included in the annual reports previously filed by E*TRADE FINANCIAL Corporation with the SEC on Form 10-K (including information under the caption “Risk Factors”) and quarterly reports on Form 10-Q. Any forward-looking statement included in this release speaks only as of the date of this communication; the Company disclaims any obligation to update any information.

© 2009 E*TRADE FINANCIAL Corporation. All rights reserved.

Financial Statements

E* TRADE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statement of Loss
(In thousands, except per share amounts)
(Unaudited)
		Three Months Ended
		March 31,			December 31,			March 31,
		2009			2008			2008
Revenue:
	Operating interest income	$	486,637		$	540,204		$	699,591
	Operating interest expense		(207,975	)		(266,107	)		(373,220	)
	Net operating interest income		278,662			274,097			326,371
	Commission		125,626			141,548			122,255
	Fees and service charges		46,715			44,441			54,941
	Principal transactions		17,642			25,336			20,490
	Gain (loss) on loans and securities, net		16,507			(11,410	)		(8,567	)
	Other revenue		12,191			12,421			13,604
	Total non-interest income		218,681			212,336			202,723
	Total net revenue		497,343			486,433			529,094
Provision for loan losses			453,963			512,874			233,871
Operating expense:
	Compensation and benefits		84,172			80,531			123,128
	Clearing and servicing		42,671			47,970			44,885
	Advertising and market development		43,591			44,684			57,448
	Communications		21,561			24,169			25,094
	Professional services		19,630			27,814			23,645
	Occupancy and equipment		19,541			23,100			20,498
	Depreciation and amortization		20,274			19,876			21,653
	Amortization of other intangibles		7,436			7,764			10,910
	Facility restructuring and other exit activities		(112	)		977			10,566
	Other		35,220			44,564			16,506
	Total operating expense		293,984			321,449			354,333
Loss before other income (expense), income tax benefit and discontinued operations			(250,604	)		(347,890	)		(59,110	)
Other income (expense):
	Corporate interest income		424			1,591			2,426
	Corporate interest expense		(87,315	)		(87,898	)		(95,241	)
	Gain (loss) on sales of investments, net		(433	)		(4,537	)		502
	Loss on early extinguishment of debt		(2,999	)		-			(2,851	)
	Equity in income (loss) of investments and venture funds		(3,129	)		(6,608	)		4,699
	Total other income (expense)		(93,452	)		(97,452	)		(90,465	)
Loss before income tax benefit and discontinued operations			(344,056	)		(445,342	)		(149,575	)
Income tax benefit			(111,371	)		(169,117	)		(56,648	)
Loss from continuing operations			(232,685	)		(276,225	)		(92,927	)
Discontinued operations, net of tax:
	Income from discontinued operations		-			-			1,734
	Gain on disposal of discontinued operations		-			662			-
	Income from discontinued operations, net of tax		-			662			1,734
Net loss		$	(232,685	)	$	(275,563	)	$	(91,193	)
Basic loss per share from continuing operations		$	(0.41	)	$	(0.50	)	$	(0.20	)
Basic earnings per share from discontinued operations			-			0.00			0.00
Basic net loss per share		$	(0.41	)	$	(0.50	)	$	(0.20	)
Diluted loss per share from continuing operations		$	(0.41	)	$	(0.50	)	$	(0.20	)
Diluted earnings per share from discontinued operations			-			0.00			0.00
Diluted net loss per share		$	(0.41	)	$	(0.50	)	$	(0.20	)
Shares used in computation of per share data:
	Basic		567,833			548,638			460,857
	Diluted(1)		567,833			548,638			460,857

E* TRADE FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
(In thousands, except share amounts)
(Unaudited)
	March 31,			December 31,
	2009			2008
ASSETS
Cash and equivalents	$	4,492,306		$	3,853,849
Cash and investments required to be segregated under federal or other regulations		1,900,235			1,141,598
Trading securities		46,309			55,481
Available-for-sale mortgage-backed and investment securities		11,823,392			10,806,094
Margin receivables		2,436,611			2,791,168
Loans, net		23,271,969			24,451,852
Investment in Federal Home Loan Bank stock		183,863			200,892
Property and equipment, net		321,934			319,222
Goodwill		1,952,326			1,938,325
Other intangibles, net		378,699			386,130
Other assets		2,639,232			2,593,604
Total assets	$	49,446,876		$	48,538,215
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits	$	27,641,485		$	26,136,246
Securities sold under agreements to repurchase		6,946,160			7,381,279
Customer payables		4,181,332			3,753,332
Other borrowings		4,083,033			4,353,777
Corporate debt		2,752,673			2,750,532
Accounts payable, accrued and other liabilities		1,384,042			1,571,553
Total liabilities		46,988,725			45,946,719
Shareholders' equity:
Common stock, $0.01 par value, shares authorized: 1,200,000,000; shares issued and outstanding: 572,051,743 at March 31, 2009 and 563,523,086 at December 31, 2008		5,721			5,635
Additional paid-in-capital		4,084,643			4,064,282
Accumulated deficit		(1,078,452	)		(845,767	)
Accumulated other comprehensive loss		(553,761	)		(632,654	)
Total shareholders' equity		2,458,151			2,591,496
Total liabilities and shareholders' equity	$	49,446,876		$	48,538,215

Segment Reporting
	Three Months Ended March 31, 2009
	Trading and Investing			Balance Sheet Management			Eliminations(2)			Total
Revenue:	(In thousands)
Operating interest income	$	259,626		$	444,292		$	(217,281	)	$	486,637
Operating interest expense		(97,951	)		(327,305	)		217,281			(207,975	)
Net operating interest income		161,675			116,987			-			278,662
Commission		125,626			-			-			125,626
Fees and service charges		45,055			1,660			-			46,715
Principal transactions		17,642			-			-			17,642
Gain (loss) on loans and securities, net		(22	)		16,529			-			16,507
Other revenue		8,894			3,297			-			12,191
Total non-interest income		197,195			21,486			-			218,681
Total net revenue		358,870			138,473			-			497,343
Provision for loan losses		-			453,963			-			453,963
Operating expense:
Compensation and benefits		69,643			14,529			-			84,172
Clearing and servicing		20,776			21,895			-			42,671
Advertising and market development		43,586			5			-			43,591
Communications		21,462			99			-			21,561
Professional services		12,908			6,722			-			19,630
Occupancy and equipment		19,673			(132	)		-			19,541
Depreciation and amortization		17,705			2,569			-			20,274
Amortization of other intangibles		7,436			-			-			7,436
Facility restructuring and other exit activities		(87	)		(25	)		-			(112	)
Other		23,618			11,602			-			35,220
Total operating expense		236,720			57,264			-			293,984
Segment income (loss)	$	122,150		$	(372,754	)	$	-		$	(250,604	)
	Three Months Ended December 31, 2008
	Trading and Investing			Balance Sheet Management			Eliminations(2)			Total
Revenue:	(In thousands)
Operating interest income	$	319,679		$	483,290		$	(262,765	)	$	540,204
Operating interest expense		(134,621	)		(394,251	)		262,765			(266,107	)
Net operating interest income		185,058			89,039			-			274,097
Commission		141,484			64			-			141,548
Fees and service charges		44,238			203			-			44,441
Principal transactions		25,336			-			-			25,336
Loss on loans and securities, net		(57	)		(11,353	)		-			(11,410	)
Other revenue		9,186			3,243			(8	)		12,421
Total non-interest income (loss)		220,187			(7,843	)		(8	)		212,336
Total net revenue		405,245			81,196			(8	)		486,433
Provision for loan losses		-			512,874			-			512,874
Operating expense:
Compensation and benefits		62,809			17,722			-			80,531
Clearing and servicing		22,957			25,021			(8	)		47,970
Advertising and market development		44,684			-			-			44,684
Communications		23,791			378			-			24,169
Professional services		15,709			12,105			-			27,814
Occupancy and equipment		22,135			965			-			23,100
Depreciation and amortization		16,441			3,435			-			19,876
Amortization of other intangibles		7,764			-			-			7,764
Facility restructuring and other exit activities		141			836			-			977
Other		36,122			8,442			-			44,564
Total operating expense		252,553			68,904			(8	)		321,449
Segment income (loss)	$	152,692		$	(500,582	)	$	-		$	(347,890	)
	Three Months Ended March 31, 2008
	Trading and Investing			Balance Sheet Management			Eliminations(2)			Total
Revenue:	(In thousands)
Operating interest income	$	416,684		$	590,121		$	(307,214	)	$	699,591
Operating interest expense		(209,378	)		(471,056	)		307,214			(373,220	)
Net operating interest income		207,306			119,065			-			326,371
Commission		121,669			586			-			122,255
Fees and service charges		50,877			4,064			-			54,941
Principal transactions		20,376			114			-			20,490
Loss on loans and securities, net		(2	)		(8,565	)		-			(8,567	)
Other revenue		9,753			3,867			(16	)		13,604
Total non-interest income		202,673			66			(16	)		202,723
Total net revenue		409,979			119,131			(16	)		529,094
Provision for loan losses		-			233,871			-			233,871
Operating expense:
Compensation and benefits		90,932			32,196			-			123,128
Clearing and servicing		20,347			24,554			(16	)		44,885
Advertising and market development		57,444			4			-			57,448
Communications		24,102			992			-			25,094
Professional services		14,852			8,793			-			23,645
Occupancy and equipment		19,640			858			-			20,498
Depreciation and amortization		16,910			4,743			-			21,653
Amortization of other intangibles		10,910			-			-			10,910
Facility restructuring and other exit activities		182			10,384			-			10,566
Other		30,637			(14,131	)		-			16,506
Total operating expense		285,956			68,393			(16	)		354,333
Segment income (loss)	$	124,023		$	(183,133	)	$	-		$	(59,110	)

Key Performance Metrics(3)
Corporate Metrics	Qtr ended 3/31/09		Qtr ended 12/31/08		Qtr ended 3/31/09 vs. 12/31/08	Qtr ended 3/31/08		Qtr ended 3/31/09 vs. 3/31/08
Operating margin %(4)
Consolidated	N.M.		N.M.		N.M.	N.M.		N.M.
Trading and Investing		34 %		38 %	(4)%		30 %	4 %
Balance Sheet Management	N.M.		N.M.		N.M.	N.M.		N.M.
Employees		3,178		3,249	(2)%		3,565	(11)%
Consultants and other		138		146	(5)%		302	(54)%
Total headcount		3,316		3,395	(2)%		3,867	(14)%
Revenue per headcount	$	149,983	$	143,279	5 %	$	136,823	10 %
Revenue per compensation and benefits dollar	$	5.91	$	6.04	(2)%	$	4.30	37 %
Book value per share	$	4.30	$	4.60	(7)%	$	5.80	(26)%
Tangible book value per share	$	0.22	$	0.47	(53)%	$	0.57	(61)%
Corporate cash ($MM)(5)	$	406.2	$	434.9	(7)%	$	296.4	37 %
Enterprise net interest spread (basis points)(6)		234		232	1 %		250	(6)%
Enterprise interest-earning assets, average ($MM)	$	44,696	$	44,329	1 %	$	48,895	(9)%
Earnings before interest, taxes, depreciation & amortization ("EBITDA") ($MM)
Loss from continuing operations	$	(232.7)	$	(276.2)	N.M.	$	(92.9)	N.M.
Tax benefit		(111.4)		(169.1)	N.M.		(56.6)	N.M.
Depreciation & amortization		27.7		27.6	0 %		32.6	(15)%
Corporate interest expense		87.3		87.9	(1)%		95.2	(8)%
EBITDA	$	(229.1)	$	(329.8)	N.M.	$	(21.7)	N.M.
Interest coverage		(2.6)		(3.8)	N.M.		(0.2)	N.M.
Bank earnings before taxes and before credit losses ($MM)(7)	$	180.9	$	164.5	10 %	$	182.7	(1)%
Trading and Investing Metrics
Trading days		61.0		63.0	N.M.		61.0	N.M.
DARTs
U.S.		170,586		188,748	(10)%		155,706	10 %
International		23,896		27,201	(12)%		24,849	(4)%
DARTs from continuing operations		194,482		215,949	(10)%		180,555	8 %
DARTs from discontinued operations		-		-	N.M.		10,169	N.M.
Total DARTs		194,482		215,949	(10)%		190,724	2 %
Total trades from continuing operations (MM)		11.9		13.6	(13)%		11.0	8 %
Total trades from discontinued operations (MM)		-		-	N.M.		0.6	N.M.
Total trades (MM)		11.9		13.6	(13)%		11.6	3 %
Average commission per trade from continuing operations	$	10.59	$	10.40	2 %	$	11.05	(4)%
Average commission per trade from discontinued operations		-		-	N.M.		10.83	N.M.
Total average commission per trade	$	10.59	$	10.40	2 %	$	11.04	(4)%
End of period margin debt from continuing operations ($B)	$	2.46	$	2.81	(12)%	$	6.46	(62)%
End of period margin debt from discontinued operations ($B)		-		-	N.M.		0.24	N.M.
Total end of period margin debt ($B)	$	2.46	$	2.81	(12)%	$	6.70	(63)%
Average margin debt from continuing operations ($B)	$	2.78	$	3.47	(20)%	$	6.73	(59)%
Average margin debt from discontinued operations ($B)		-		-	N.M.		0.26	N.M.
Total average margin debt ($B)	$	2.78	$	3.47	(20)%	$	6.99	(60)%
Gross new brokerage accounts		147,646		192,275	(23)%		128,611	15 %
Gross new stock plan accounts		41,216		42,558	(3)%		46,791	(12)%
Gross new banking accounts		49,906		55,077	(9)%		119,294	(58)%
Closed accounts(8)		(182,819)		(207,950)	N.M.		(228,750)	N.M.
Net new accounts from continuing operations		55,949		81,960	(32)%		65,946	(15)%
Net new accounts from discontinued operations		-		-	N.M.		(16,400)	N.M.
Net new accounts		55,949		81,960	(32)%		49,546	13 %
Net new brokerage accounts		63,241		77,241	(18)%		24,997	153 %
Net new stock plan accounts		(15,868)		(1,332)	N.M.		(26,146)	N.M.
Net new banking accounts		8,576		6,051	42 %		67,095	(87)%
Net new accounts		55,949		81,960	(32)%		65,946	(15)%
End of period brokerage accounts		2,660,584		2,597,343	2 %		2,477,892	7 %
End of period stock plan accounts		1,002,862		1,018,730	(2)%		1,028,614	(3)%
End of period banking accounts(8)		825,799		817,223	1 %		799,572	3 %
End of period accounts from continuing operations		4,489,245		4,433,296	1 %		4,306,078	4 %
End of period accounts from discontinued operations		-		-	N.M.		412,790	N.M.
End of period total accounts		4,489,245		4,433,296	1 %		4,718,868	(5)%
Net new customers from continuing operations(9)		50,989		69,486	(27)%		36,877	38 %
Net new customers from discontinued operations and other(9)		-		-	N.M.		17,160	N.M.
Total net new customers(9)		50,989		69,486	(27)%		54,037	(6)%
End of period brokerage customers		2,258,726		2,201,862	3 %		2,092,346	8 %
End of period all other customers		955,203		961,078	(1)%		964,937	(1)%
End of period total customers(9)		3,213,929		3,162,940	2 %		3,057,283	5 %
Segment income per brokerage customer	$	159	$	184	(14)%	$	196	(19)%
Customer Assets ($B)
Security holdings	$	67.0	$	69.7	(4)%	$	105.4	(36)%
Customer payables (cash)(10)		4.2		3.8	11 %		4.4	(5)%
Customer cash balances held by third parties		2.8		2.8	0 %		3.3	(15)%
Unexercised stock plan customer options (vested)		9.0		10.2	(12)%		24.5	(63)%
Customer assets in brokerage and stock plan accounts		83.0		86.5	(4)%		137.6	(40)%
Sweep deposit accounts		10.2		9.6	6 %		10.0	2 %
Savings and transaction accounts		15.1		13.7	10 %		12.5	21 %
CDs		2.1		2.4	(13)%		3.7	(43)%
Customer assets in banking accounts		27.4		25.7	7 %		26.2	5 %
Customer assets from continuing operations		110.4		112.2	(2)%		163.8	(33)%
Customer assets from discontinued operations		-		-	N.M.		4.6	N.M.
Total customer assets	$	110.4	$	112.2	(2)%	$	168.4	(34)%
Net new customer assets from continuing operations ($B)(11)	$	3.5	$	3.5	0 %	$	0.3	1067 %
Net new customer assets from discontinued operations and other ($B)(11)		-		-	N.M.		-	N.M.
Total net new customer assets ($B)(11)	$	3.5	$	3.5	0 %	$	0.3	1067 %
Brokerage related cash ($B)	$	17.2	$	16.2	6 %	$	17.7	(3)%
Other customer cash and deposits ($B)		17.2		16.1	7 %		16.2	6 %
Total customer cash and deposits from continuing operations ($B)		34.4		32.3	7 %		33.9	1 %
Total customer cash and deposits from discontinued operations ($B)		-		-	N.M.		1.0	N.M.
Total customer cash and deposits ($B)	$	34.4	$	32.3	7 %	$	34.9	(1)%
Unexercised stock plan customer options (unvested) ($B)	$	12.0	$	10.7	12 %	$	20.2	(41)%
Market Making
Equity shares traded (MM)		49,824		27,418	82 %		33,503	49 %
Average revenue capture per 1,000 equity shares	$	0.339	$	0.893	(62)%	$	0.566	(40)%
% of Bulletin Board equity shares to total equity shares		86.8%		80.3%	7 %		87.8%	(1)%
Balance Sheet Management Metrics
Capital Ratios
Tier 1 Capital Ratio(12)		5.63 %		6.29 %	(0.66)%		6.78 %	(1.15)%
Risk-based Capital Ratio(12)		11.85 %		12.95 %	(1.10)%		12.36 %	(0.51)%
E*TRADE Bank excess tier 1 capital ($MM)(12)	$	288.1	$	578.5	(50)%	$	859.9	(66)%
E*TRADE Bank excess risk-based capital ($MM)(12)	$	450.5	$	714.7	(37)%	$	695.3	(35)%
Loans receivable ($MM)
Average loans receivable	$	25,083	$	25,997	(4)%	$	29,890	(16)%
Ending loans receivable, net	$	23,272	$	24,452	(5)%	$	28,425	(18)%
One- to Four-Family
Loan performance detail ($MM)
Current	$	11,112	$	11,836	(6)%	$	14,033	(21)%
30-89 days delinquent		587		594	(1)%		363	62 %
90-179 days delinquent		453		273	66 %		151	200 %
Total 30-179 days delinquent		1,040		867	20 %		514	102 %
180+ days delinquent (net of $110M, $61M and $8M in charge-offs for Q109, Q408 and Q108, respectively)		429		320	34 %		141	204 %
Total delinquent loans		1,469		1,187	24 %		655	124 %
Gross loans receivable(13)	$	12,581	$	13,023	(3)%	$	14,688	(14)%
Credit Quality and Reserve Metrics
Special mention loans (30-89 days delinquent) as a % of gross loans receivable		4.67%		4.56%	0.11 %		2.47%	2.20 %
Nonperforming loans (90+ days delinquent) as a % of gross loans receivable		7.01%		4.55%	2.46 %		1.99%	5.02 %
Total delinquent loans (30+ days delinquent) as a % of gross loans receivable		11.68%		9.12%	2.56 %		4.46%	7.22 %
Total 30-179 days delinquent loans as a % of allowance for loan losses		336.78%		468.37%	(131.59)%		1241.78%	(905.00)%
Allowance for loan losses as a % of gross loans receivable		2.45%		1.42%	1.03 %		0.28%	2.17 %
Allowance for loan losses as a % of nonperforming loans		35.01%		31.22%	3.79 %		14.17%	20.84 %
Net charge-offs as a % of average loans receivable (annualized)		2.10%		1.74%	0.36 %		0.38%	1.72 %
Provision as a % of average loans receivable (annualized)		5.97%		3.56%	2.41 %		0.98%	4.99 %
Home Equity
Loan performance detail ($MM)
Current	$	8,961	$	9,431	(5)%	$	11,029	(19)%
30-89 days delinquent		305		408	(25)%		277	10 %
90-179 days delinquent		347		278	25 %		222	56 %
Total 30-179 days delinquent		652		686	(5)%		499	31 %
180+ days delinquent (net of $21M, $12M and $9M in charge-offs for Q109, Q408 and Q108, respectively)		72		63	14 %		63	14 %
Total delinquent loans		724		749	(3)%		562	29 %
Gross loans receivable(13)	$	9,685	$	10,180	(5)%	$	11,591	(16)%
Credit Quality and Reserve Metrics
Special mention loans (30-89 days delinquent) as a % of gross loans receivable		3.15%		4.00%	(0.85)%		2.39%	0.76 %
Nonperforming loans (90+ days delinquent) as a % of gross loans receivable		4.33%		3.35%	0.98 %		2.46%	1.87 %
Total delinquent loans (30+ days delinquent) as a % of gross loans receivable		7.48%		7.35%	0.13 %		4.85%	2.63 %
Total 30-179 days delinquent loans as a % of allowance for loan losses		79.62%		82.30%	(2.68)%		101.64%	(22.02)%
Allowance for loan losses as a % of gross loans receivable		8.45%		8.19%	0.26 %		4.23%	4.22 %
Allowance for loan losses as a % of nonperforming loans		195.07%		244.34%	(49.27)%		172.18%	22.89 %
Net charge-offs as a % of average loans receivable (annualized)		9.79%		8.72%	1.07 %		5.02%	4.77 %
Provision as a % of average loans receivable (annualized)		9.18%		14.18%	(5.00)%		6.09%	3.09 %
Consumer and Other
Loan performance detail ($MM)
Current	$	2,157	$	2,288	(6)%	$	2,682	(20)%
30-89 days delinquent		41		33	24 %		23	78 %
90-179 days delinquent		8		7	14 %		6	33 %
Total 30-179 days delinquent		49		40	23 %		29	69 %
180+ days delinquent		1		1	0 %		1	0 %
Total delinquent loans		50		41	22 %		30	67 %
Gross loans receivable(13)	$	2,207	$	2,329	(5)%	$	2,712	(19)%
Credit Quality and Reserve Metrics
Special mention loans (30-89 days delinquent) as a % of gross loans receivable		1.85%		1.43%	0.42 %		0.84%	1.01 %
Nonperforming loans (90+ days delinquent) as a % of gross loans receivable		0.41%		0.33%	0.08 %		0.26%	0.15 %
Total delinquent loans (30+ days delinquent) as a % of gross loans receivable		2.26%		1.76%	0.50 %		1.11%	1.15 %
Total 30-179 days delinquent loans as a % of allowance for loan losses		66.47%		65.02%	1.45 %		85.43%	(18.96)%
Allowance for loan losses as a % of gross loans receivable		3.32%		2.65%	0.67 %		1.24%	2.08 %
Allowance for loan losses as a % of nonperforming loans		804.96%		790.72%	14.24 %		471.56%	333.40 %
Net charge-offs as a % of average loans receivable (annualized)		3.77%		3.67%	0.10 %		1.74%	2.03 %
Provision as a % of average loans receivable (annualized)		5.83%		4.30%	1.53 %		2.24%	3.59 %
Total Loans Receivable
Loan performance detail ($MM)
Current	$	22,230	$	23,555	(6)%	$	27,744	(20)%
30-89 days delinquent		933		1,035	(10)%		663	41 %
90-179 days delinquent		808		558	45 %		379	113 %
Total 30-179 days delinquent		1,741		1,593	9 %		1,042	67 %
180+ days delinquent		502		384	31 %		205	145 %
Total delinquent loans		2,243		1,977	13 %		1,247	80 %
Total gross loans receivable(13)	$	24,473	$	25,532	(4)%	$	28,991	(16)%
Credit Quality and Reserve Metrics
Special mention loans (30-89 days delinquent) as a % of gross loans receivable		3.81%		4.05%	(0.24)%		2.29%	1.52 %
Nonperforming loans (90+ days delinquent) as a % of gross loans receivable		5.36%		3.69%	1.67 %		2.02%	3.34 %
Total delinquent loans (30+ days delinquent) as a % of gross loans receivable		9.17%		7.74%	1.43 %		4.30%	4.87 %
Total 30-179 days delinquent loans as a % of allowance for loan losses		144.95%		147.47%	(2.52)%		184.09%	(39.14)%
Allowance for loan losses as a % of gross loans receivable		4.91%		4.23%	0.68 %		1.95%	2.96 %
Allowance for loan losses as a % of nonperforming loans		91.60%		114.70%	(23.10)%		96.84%	(5.24)%
Net charge-offs as a % of average loans receivable (annualized)		5.32%		4.72%	0.60 %		2.36%	2.96 %
Provision as a % of average loans receivable (annualized)		7.24%		7.89%	(0.65)%		3.13%	4.11 %

Activity in Allowance for Loan Losses
	Three Months Ended March 31, 2009
	One- to Four- Family			Home Equity			Consumer  and Other			Total
	(In thousands)
Allowance for loan losses, ending 12/31/08	$	185,163		$	833,835		$	61,613		$	1,080,611
Provision for loan losses		190,687			230,102			33,174			453,963
Charge-offs, net		(67,044	)		(245,291	)		(21,431	)		(333,766	)
Allowance for loan losses, ending 3/31/09	$	308,806		$	818,646		$	73,356		$	1,200,808
	Three Months Ended December 31, 2008
	One- to Four- Family			Home Equity			Consumer  and Other			Total
	(In thousands)
Allowance for loan losses, ending 9/30/08	$	125,118		$	691,284		$	57,820		$	874,222
Provision for loan losses		117,279			369,892			25,703			512,874
Charge-offs, net		(57,234	)		(227,341	)		(21,910	)		(306,485	)
Allowance for loan losses, ending 12/31/08	$	185,163		$	833,835		$	61,613		$	1,080,611
	Three Months Ended March 31, 2008
	One- to Four- Family			Home Equity			Consumer  and Other			Total
	(In thousands)
Allowance for loan losses, ending 12/31/07	$	18,831		$	459,167		$	30,166		$	508,164
Provision for loan losses		37,175			181,030			15,666			233,871
Charge-offs, net		(14,603	)		(149,366	)		(12,158	)		(176,127	)
Allowance for loan losses, ending 3/31/08	$	41,403		$	490,831		$	33,674		$	565,908

Average Enterprise Balance Sheet Data
	Three Months Ended
	March 31, 2009
	Average Balance			Operating Interest Inc./Exp.			Average Yield/Cost
Enterprise interest-earning assets:	(In thousands)
Loans, net(14)	$	25,083,318		$	313,328			5.00	%
Margin receivables		2,751,510			26,937			3.97	%
Available-for-sale mortgage-backed securities		11,173,259			125,749			4.50	%
Available-for-sale investment securities		126,307			2,034			6.44	%
Trading securities		35,528			671			7.56	%
Cash and cash equivalents(15)		4,937,608			5,736			0.47	%
Stock borrow and other		588,748			8,101			5.58	%
Total enterprise interest-earning assets	$	44,696,278			482,556			4.32	%
Enterprise interest-bearing liabilities:
Retail deposits	$	26,375,688			93,433			1.44	%
Brokered certificates of deposit		293,714			3,581			4.94	%
Customer payables		3,771,868			2,802			0.30	%
Repurchase agreements and other borrowings		7,589,825			66,075			3.48	%
FHLB advances		3,683,600			41,204			4.47	%
Stock loan and other		422,639			868			0.83	%
Total enterprise interest-bearing liabilities	$	42,137,334			207,963			1.98	%
Enterprise net interest income/spread(6)				$	274,593			2.34	%
	Three Months Ended
	December 31, 2008
	Average Balance			Operating Interest Inc./Exp.			Average Yield/Cost
Enterprise interest-earning assets:	(In thousands)
Loans, net(14)	$	25,997,688		$	354,966			5.46	%
Margin receivables		3,463,271			39,603			4.55	%
Available-for-sale mortgage-backed securities		10,391,623			118,756			4.57	%
Available-for-sale investment securities		131,079			2,236			6.82	%
Trading securities		32,361			562			6.94	%
Cash and cash equivalents(15)		3,704,176			11,090			1.19	%
Stock borrow and other		608,608			6,971			4.56	%
Total enterprise interest-earning assets	$	44,328,806			534,184			4.82	%
Enterprise interest-bearing liabilities:
Retail deposits	$	25,214,422			121,745			1.92	%
Brokered certificates of deposit		663,116			8,556			5.13	%
Customer payables		3,897,877			4,346			0.44	%
Repurchase agreements and other borrowings		7,911,717			83,079			4.11	%
FHLB advances		3,912,839			46,467			4.65	%
Stock loan and other		433,502			1,873			1.72	%
Total enterprise interest-bearing liabilities	$	42,033,473			266,066			2.50	%
Enterprise net interest income/spread(6)				$	268,118			2.32	%
	Three Months Ended
	March 31, 2008
	Average Balance			Operating Interest Inc./Exp.			Average Yield/Cost
Enterprise interest-earning assets:	(In thousands)
Loans, net(14)	$	29,925,013		$	451,574			6.04	%
Margin receivables		6,683,969			90,937			5.47	%
Available-for-sale mortgage-backed securities		9,281,381			110,072			4.74	%
Available-for-sale investment securities		169,848			2,835			6.67	%
Trading securities		572,817			10,708			7.48	%
Cash and cash equivalents(15)		1,468,776			13,833			3.79	%
Stock borrow and other		793,450			15,640			7.93	%
Total enterprise interest-earning assets	$	48,895,254			695,599			5.70	%
Enterprise interest-bearing liabilities:
Retail deposits	$	25,383,594			171,535			2.72	%
Brokered certificates of deposit		1,229,811			15,169			4.96	%
Customer payables		4,348,906			9,910			0.92	%
Repurchase agreements and other borrowings		7,980,130			94,934			4.71	%
FHLB advances		5,974,084			70,802			4.69	%
Stock loan and other		1,679,887			10,640			2.55	%
Total enterprise interest-bearing liabilities	$	46,596,412			372,990			3.20	%
Enterprise net interest income/spread(6)				$	322,609			2.50	%
Reconciliation from Enterprise Net Interest Income to Net Operating Interest Income
	Three Months Ended
	March 31,			December 31,			March 31,
	2009			2008			2008
	(In thousands)
Enterprise net interest income	$	274,593		$	268,118		$	322,609
Taxable equivalent interest adjustment(16)		(714	)		(691	)		(3,698	)
Customer cash held by third parties and other(17)		4,783			6,670			7,460
Net operating interest income	$	278,662		$	274,097		$	326,371

Supplemental Portfolio Disclosure
Mortgage Loan Portfolio(18)
	One- to Four-Family Mortgage Loan Distribution
	Unpaid principal balances at March 31, 2009 ($MM)
		FICO
	LTV	>=720		719-700		699-680		679-660		659-620		<620		Total
	<70%	$	3,777	$	680	$	507	$	309	$	188	$	4	$	5,465
	70%-80%		4,426		970		749		413		184		5		6,747
	80%-90%		86		31		29		24		12		-		182
	>90%		68		24		24		15		15		-		146
	Total	$	8,357	$	1,705	$	1,309	$	761	$	399	$	9	$	12,540
	One- to Four-Family 30+ Days Delinquent Loan Distribution
	March 31, 2009 ($MM)
		FICO
	LTV	>=720		719-700		699-680		679-660		659-620		<620		Total
	<70%	$	145	$	65	$	65	$	52	$	29	$	1	$	357
	70%-80%		483		206		174		109		51		-		1,023
	80%-90%		16		10		11		10		5		-		52
	>90%		14		6		5		6		6		-		37
	Total	$	658	$	287	$	255	$	177	$	91	$	1	$	1,469
	Home Equity Loan Distribution
	Unpaid principal balances at March 31, 2009 ($MM)
		FICO
	CLTV	>=720		719-700		699-680		679-660		659-620		<620		Total
	<70%	$	2,125	$	360	$	289	$	126	$	100	$	10	$	3,010
	70%-80%		1,033		291		243		94		82		1		1,744
	80%-90%		1,693		566		527		215		146		1		3,148
	>90%		883		296		247		127		78		-		1,631
	Total	$	5,734	$	1,513	$	1,306	$	562	$	406	$	12	$	9,533
	Home Equity 30+ Days Delinquent Loan Distribution
	March 31, 2009 ($MM)
		FICO
	CLTV	>=720		719-700		699-680		679-660		659-620		<620		Total
	<70%	$	24	$	11	$	15	$	7	$	7	$	1	$	65
	70%-80%		40		24		22		11		11		-		108
	80%-90%		139		68		71		31		26		-		335
	>90%		91		46		41		25		14		-		217
	Total	$	294	$	149	$	149	$	74	$	58	$	1	$	725

Investment Securities Portfolio
	Book value at March 31, 2009 ($MM)
		AAA		AA		A		BBB		Below  Investment  Grade and  Non-Rated		Total
	Mortgage-backed securities backed by U.S. Government sponsored and federal agencies	$	11,118	$	-	$	-	$	-	$	-	$	11,118
	Collateralized mortgage obligations and other		577		64		9		33		214		897
	Municipal bonds, corporate bonds and FHLB stock		214		12		64		-		20		310
	Total	$	11,909	$	76	$	73	$	33	$	234	$	12,325

SUPPLEMENTAL INFORMATION

Explanation of Non-GAAP Measures and Certain Metrics

Management believes that EBITDA, interest coverage, enterprise net interest income and enterprise interest-earning assets are appropriate measures for evaluating the operating and liquidity performance of the Company. Management believes that the elimination of certain items from the related GAAP measures is helpful to investors and analysts who may wish to use some or all of this information to analyze our current performance, prospects and valuation. Management uses non-GAAP information internally to evaluate our operating performance and in formulating our budget for future periods.

Reporting Changes

Beginning in the first quarter of 2009, the Company revised its segment financial reporting to reflect the manner in which its chief operating decision maker had begun assessing the Company’s performance and making resource allocation decisions. As a result, the Company now reports its operating results in two segments: 1) “Trading and Investing”, which includes the businesses that were formerly in the “Retail” segment and now includes the Company’s market-making business, and 2) “Balance Sheet Management”, which includes the businesses from the former “Institutional” segment, other than the market-making business.

Corporate Cash

Corporate cash represents cash held at the parent company. The Company believes that corporate cash is a useful measure of the parent company’s liquidity as it is the primary source of capital above and beyond the capital deployed in our regulated subsidiaries.

EBITDA

EBITDA represents net income (loss) from continuing operations before taxes, depreciation and amortization and corporate interest expense. Management believes that EBITDA provides a useful additional measure of our performance by excluding certain non-cash charges and expenses that are not directly related to the performance of our business.

Interest Coverage

Interest coverage represents EBITDA divided by corporate interest expense. Management believes that by excluding the charges and expenses that are excluded from EBITDA, interest coverage provides a useful additional measure of our ability to continue to meet our interest obligations and our liquidity.

Bank Earnings Before Taxes and Before Credit Losses

Bank earnings before taxes and before credit losses represents the pre-tax earnings of E*TRADE Bank Holding Company ("ETBH" or “Bank”) before discontinued operations, loss on securities, net and provision for loan losses. This metric shows the amount of earnings that the Bank, after accruing for the interest expense on its trust preferred securities, generates each quarter prior to credit related losses, primarily provision and loss on securities. Management believes this non-GAAP measure is useful to investors and analysts as it is an indicator of the level of credit related losses the Bank can absorb without causing a decline in E*TRADE Bank’s excess risk-based capital.

Enterprise Net Interest Income

Enterprise net interest income is taxable equivalent basis net operating interest income excluding corporate interest income, corporate interest expense and interest earned on customer cash held by third parties. Management believes this non-GAAP measure is useful to investors and analysts as it is a measure of the net operating interest income generated by our core operations.

Enterprise Interest-Earning Assets

Enterprise interest-earning assets consists of the primary interest-earning assets of the Company and includes: loans receivable, mortgage-backed and available-for-sale securities, margin receivables, stock borrow balances and cash that earns interest for the Company. Management believes that this non-GAAP measure is useful to investors and analysts as it is a measure of the primary assets from which the Company generates net operating interest income.

It is important to note these metrics and other non-GAAP measures may involve judgment by management and should be considered in addition to, not as a substitute for, or superior to, net income (loss), consolidated statements of cash flows, or other measures of financial performance prepared in accordance with GAAP. For complete information on the items excluded from these non-GAAP measures, please see our financial statements and “Management’s Discussion and Analysis of Results of Operations and Financial Condition” that will be included in the periodic report the Company expects to file with the SEC with respect to the financial periods discussed herein.

ENDNOTES

(1) Because the Company reported a net loss for the periods presented, the calculation of diluted net loss per share does not include common stock equivalents as they are anti-dilutive and would result in a reduction of net loss per share.

(2) Reflects elimination of transactions between Trading and Investing and Balance Sheet Management segments, which includes deposit and intercompany transfer pricing arrangements.

(3) Amounts and percentages may not calculate due to rounding.

(4) Operating margin is the percentage of net revenue that results in income (loss) before other income (expense), income taxes and discontinued operations. The percentage is calculated by dividing income (loss) before other income (expense), income taxes and discontinued operations by total net revenue.

(5) Corporate cash is an indicator of the liquidity at the parent company. Corporate cash for March 31, 2009 and December 31, 2008 includes $30.0 million and $45.3 million, respectively, which we invested in The Primary Fund and is included as a receivable in the other assets line item as The Reserve Fund has not indicated when the funds will be distributed back to investors.

(6) Enterprise net interest spread is the taxable equivalent rate earned on average enterprise interest-earning assets less the rate paid on average enterprise interest-bearing liabilities, excluding corporate interest-earning assets and liabilities and customer cash held by third parties.

(7) Bank earnings before taxes and before credit losses represents the pre-tax earnings of E*TRADE Bank Holding Company (“ETBH” or “Bank”) before discontinued operations, loss on securities, net and provision for loan losses. This metric shows the amount of earnings that the Bank, after accruing for the interest expense on its trust preferred securities, generates each quarter prior to credit related losses, primarily provision and loss on securities. Management believes this non-GAAP measure is useful to investors and analysts as it is an indicator of the level of credit related losses the Bank can absorb without causing a decline in E*TRADE Bank’s excess risk-based capital^(a). Below is a reconciliation of Bank earnings before taxes and before credit losses from Loss before income taxes and discontinued operations:

	Q1 2009			Q4 2008			Q1 2008
Loss before income tax benefit and discontinued operations	$	(344,056	)	$	(445,342	)	$	(149,575	)
Add back:
Non-bank loss before income tax benefit and discontinued operations(b)		87,540			85,542			90,285
Provision for loan losses		453,963			512,874			233,871
(Gain) loss on securities, net(c)		(16,507	)		11,410			8,069
Bank earnings before taxes and before credit losses	$	180,940		$	164,484		$	182,650

^(a) Excess risk-based capital is the excess capital that E*TRADE Bank has compared to the regulatory minimum well-capitalized threshold.

^(b) Non-bank loss represents all of the Company’s subsidiaries including Corporate and Brokerage, but excluding the Bank.

^(c) (Gain) loss on securities, net is included in the Gain (loss) on loans and securities, net line item on the consolidated statement of loss.

(8) During the first quarter of 2009, we updated the definition of an active Complete Savings Account. Prior to this update, all Complete Savings Accounts were considered an active account including those accounts with a nominal positive balance. Subsequent to this change, only Complete Savings Accounts with a balance of $25 or more are considered an active account. We believe this change improves the usefulness of our Complete Savings Account metric as it is now more consistent with our definition of an active brokerage account. The impact of this change is summarized in the table below. All prior periods presented have been updated to reflect this change.

	Q4 2008		Q1 2008
Previously reported end of period banking accounts	916,961		858,942
Reduction due to revised definition	(99,738	)	(59,370	)
Revised end of period banking accounts	817,223		799,572

(9) During the first quarter of 2009, we updated the definition of an active customer to exclude customers that only have a Complete Savings Account with a balance of less than $25. Net new customers from discontinued operations and other consists of customers related to our discontinued operations and the impact of an improvement in our customer identification methodology implemented during the second quarter of 2008. All prior periods presented have been updated to reflect this change.

(10) Excludes customer payables (cash) from discontinued operations.

(11) Net new customer assets are total inflows to all new and existing customer accounts less total outflows from all closed and existing customer accounts.

(12) Q109 estimate based on the regulatory minimum well-capitalized threshold.

(13) Includes unpaid principal balances and premiums (discounts).

(14) Excludes loans to customers on margin.

(15) Includes segregated cash balances.

(16) Gross-up for tax-exempt securities.

(17) Includes interest earned on average customer assets of $2.8 billion, $3.0 billion and $3.3 billion for the quarters ended March 31, 2009, December 31, 2008 and March 31, 2008, respectively, held by parties outside E*TRADE FINANCIAL, including third party money market funds and sweep deposit accounts at unaffiliated financial institutions.

(18) LTV/CLTV data is based on LTV/CLTV ratios at the time of loan origination, and has not been updated to reflect changes in property values since that time. CLTV calculations for home equity lines of credit are based on drawn balances. FICO score is based on FICO scores at the time of loan origination, and has not been updated to reflect changes in credit scores since that time.

CONTACT:
E*TRADE FINANCIAL Media Relations Contact
Pam Erickson, 617-296-6080
pam.erickson@etrade.com
or
E*TRADE FINANCIAL Investor Relations Contact
Brett Goodman, 646-521-4406
brett.goodman@etrade.com